Indian Journal of Science and Technology

Abstract

Objectives: To propose revenue management focused model for Capacitated Vehicle Routing Problem with Simultaneous Pickup and Delivery and pursue a solution to it. In some industries, customer demand for delivery and pickup fluctuates and the vehicle capacities are limited. Existing research focuses on either Revenue Maximization or Transportation Cost Minimization. To be able to run such businesses profitably, it is necessary to consider both objectives by the help of the proposed model. Dynamic pricing will be used for revenue maximization, by booking early reservations for a lower price. Vehicle Routing Problem will determine the route to minimize the total transportation cost.

Methods: The capacitated vehicle routing model with simultaneous pickup and delivery is combined with a revenue management model in which low price early reservations are allowed. In case the customer orders cannot be handled with existing vehicle capacities, some of the early reservation orders are canceled and a cancellation fee is incurred. The model is solved with a mixed-integer linear programming (MILP) solver.

Findings: The proposed model is tested against a real-world data set. The result shows that unprofitable customer orders are determined by the model and rejected despite there is a cancellation fee. By applying the revenue management model, it is observed that there is an increase in the total profit.

Novelty: To the best of our knowledge, this study proposed a revenue management focused MILP model for VRP with simultaneous pickup and delivery for the first time.

Keywords: Vehicle Routing Model, Revenue Management, Simultaneous Pick-up and Delivery, Supply Chain Management.